Connecticut Clamps Down on Robinhood, Crypto.com and Kalshi Prediction Markets

Regulators in Connecticut are taking a hard line against three major fintech platforms, signaling a new phase of scrutiny for retail trading and crypto.

The Regulatory Hammer Falls

The state's Department of Banking isn't mincing words. It's issued cease-and-desist orders to Robinhood, Crypto.com, and Kalshi, accusing them of offering unregistered securities or operating without proper licensing. The move targets a trading app, a crypto exchange, and an event-prediction market—a trifecta of modern retail finance that's now squarely in the crosshairs.

Why This Crackdown Matters

This isn't just about three companies. It's a shot across the bow for an entire industry that's built its empire on the 'move fast and ask for forgiveness later' playbook. Connecticut is drawing a line, insisting that innovation doesn't get a free pass from rules designed to protect investors. It's a reminder that when you mix Main Street money with complex, often speculative products, regulators eventually show up—usually after the marketing blitz is over.

The Ripple Effect for Crypto

For the crypto sector, the action against Crypto.com is particularly telling. It underscores the persistent regulatory gray area that exchanges navigate. Every enforcement action like this adds pressure, pushing the industry toward either clearer compliance or a retreat from certain markets. It’s the tedious, expensive cost of doing business in a sector that once promised to bypass the old gatekeepers entirely.

The crackdown closes with a stark warning to other firms: get your paperwork in order. For an industry built on disrupting traditional finance, it seems the old rules still have plenty of bite. After all, nothing says 'market stability' like a government document forcing your favorite app to stop what it's doing.

TLDR

• Connecticut sent cease and desist letters to Robinhood, Crypto.com, and Kalshi on Wednesday for allegedly running unlicensed sports betting through event contracts
• The state says none of these platforms have licenses to offer wagering in Connecticut and their contracts violate state laws including allowing bets from people under 21
• Kalshi filed a federal lawsuit against Connecticut claiming it operates under CFTC federal jurisdiction and is exempt from state regulation
• Robinhood defended its operations saying its event contracts are federally regulated by the CFTC through a registered entity
• Kalshi faces similar legal challenges in at least 10 US states including New York, Massachusetts, Arizona, Illinois, Montana, Ohio, New Jersey, Maryland, and Nevada

Connecticut’s Department of Consumer Protection sent cease and desist orders to three major platforms on Wednesday. The state accused Robinhood, Crypto.com, and Kalshi of operating unlicensed sports betting through their event contracts.

Connecticut has issued cease-and-desist orders to Kalshi, Robinhood and crypto com, accusing them of operating unlicensed online sports betting through event-based contracts. The firms were ordered to immediately stop offering or promoting such services to state residents.…

— Wu Blockchain (@WuBlockchain) December 4, 2025

Commissioner Bryan Cafferelli stated that none of these companies have licenses to offer wagering in Connecticut. He said their contracts violate state laws, including rules that prohibit betting for people under 21 years old.

The department’s Gaming Director Kris Gilman accused the platforms of misleading advertising. He said they operate outside Connecticut’s regulatory system and pose risks to consumers who may not know their money and information lack protection.

Today, DCP's Gaming Division issued Cease and Desist orders to three platforms conducting unlicensed sports wagering.

Learn why Prediction Market Platforms offering "Sports Events" Contracts are illegal:https://t.co/LXLK1tRR0w

— Connecticut Department of Consumer Protection (@CTDCP) December 3, 2025

Connecticut currently licenses only three platforms for sports wagering. DraftKings operates through Foxwoods, FanDuel through Mohegan Sun, and Fanatics through the Connecticut Lottery. All three require users to be at least 21 years old.

Platforms Claim Federal Protection

Kalshi responded by filing a federal lawsuit against Connecticut on Wednesday. A company spokesperson said Kalshi is a regulated nationwide exchange subject to exclusive federal jurisdiction. The platform argues it differs from state-regulated sportsbooks and casinos.

The company’s lawsuit claims Connecticut’s regulatory attempt interferes with the federal framework Congress established for derivatives on designated exchanges. Kalshi operates under the Commodity Futures Trading Commission’s jurisdiction and says its sports event contracts comply with federal law.

Robinhood issued a similar defense. A spokesperson said the company’s event contracts receive federal regulation from the CFTC through Robinhood Derivatives, LLC. The registered entity allows retail customers to access prediction markets in what the company calls a compliant manner.

State Concerns About Consumer Protection

Connecticut’s Department of Consumer Protection outlined several concerns about prediction market platforms. The agency said these platforms lack required technical standards and security protections for financial and personal data.

The department also said the platforms operate without integrity controls to prevent insider betting or manipulation. They lack regulatory oversight of payout rules and advertise to self-excluded gamblers and on college campuses.

The state claims some platforms permit betting on events with known outcomes. This practice gives insiders unfair advantages over regular users.

Wider Legal Battles

Connecticut joins other states taking action against prediction markets. New York sent a cease and desist to Kalshi in late October. Kalshi sued New York on October 27.

Massachusetts Attorney General sued Kalshi in state court in September. The platform also received cease and desist orders from Arizona, Illinois, Montana, and Ohio this year.

Kalshi remains in ongoing litigation in New Jersey, Maryland, and Nevada. A federal judge in Nevada ruled last month that state regulators have jurisdiction over some sports-based events contracts. Kalshi plans to appeal that decision.

The company announced this week it closed a $1 billion funding round at an $11 billion valuation. This came after Kalshi recorded its best-ever monthly volume in November.

Crypto.com did not respond to requests for comment. The state warned that failure to comply with the cease and desist orders could result in civil or criminal penalties.